ALJ: CCN for Two New Utility-Owned Generating Units Would Have No Effect On Customer Choice

Granting El Paso Electric Company a certificate of convenience and necessity (CCN) for two new, gas-fired, combustion turbine generation units would have no effect on retail competition in EPE's service area, a Texas ALJ would rule in a proposal for decision.

EPE is seeking a CCN for Montana Units 3 and 4, which would each add 88 megawatts (MW) of capacity to EPE's system. EPE estimates that the total direct capital cost of Montana Units 3 and 4 would be $140.2 million plus an estimated $17.1 million of allowance for funds used during construction (AFUDC).

An individual customer of El Paso Electric, Rocky Bacchus, had protested the granting of the CCN, arguing that it would further impede customer choice in the territory. Bacchus had recommended that the utility be required to procure the needed capacity from customer-sited resources and customer interruptible loads.

The proceeding examined, "What effect, if any, would approval of the CCN have on the implementation of customer choice in the applicant's service territory, particularly on how the utility would mitigate market power and achieve full customer choice, including specific alternatives for constructing additional transmission facilities, auctioning rights to generation capacity, divesting generation capacity, or any other measure that is consistent with the public interest? [PURA § 39.402(c)]."

In a proposal for decision issued last week, an ALJ would conclude that granting the CCNs, "will have no effect on retail competition in EPE's service area."

The ALJ noted that EPE's transition to competition is controlled by PURA § 39.553. Under PURA § 39.553 and P.U.C. Subst. R. 25.421, the first stage is the development, approval, and operation of a regional transmission organization (RTO) for the EPE region.

"EPE is an active participant in the development of WestConnect, which may result in the formation of an RTO. But no plan is in place to form or request approval of an RTO from the Federal Energy Regulatory Commission," the ALJ noted, citing EPE testimony.

"No plan is in place to form or request FERC approval of an RTO, and EPE cannot unilaterally form an RTO. Approval of a CCN for the proposed generating units will not affect the development of an RTO in which EPE could participate," the ALJ says in two findings of fact

Any EPE transition to retail choice is dependent on a 5-step timeline set out in statute and Commission rule. "EPE is not in a position to transition to competition at this time," the ALJ concurred.

"The approval of this CCN will also not affect any subsequent stage toward full retail competition in EPE's service area," the ALJ said.

The ALJ's proposed decision would grant EPE the requested CCN.

The CCN case did not address the prudence and costs of EPE's investment in the new generation units, and issues related to Montana Units 3 and 4 (as well as Units 1 and 2) will be determined in a future rate case.

Docket 41763